Bitcoin, Ethereum Crash as Trump Slaps Tariffs on China — Buy The Dip Next?

Shockwaves ripped through the cryptocurrency market over the weekend as Bitcoin (BTC) and Ethereum’s native token, Ether (ETH), plunged following US President Donald Trump’s sudden tariff announcement.

Since Feb. 2, Bitcoin has dropped by over 11% and Ether by over 30%. Other cryptocurrencies, such as XRP (XRP), Cardano (ADA), and Solana (SOL), have also declined significantly, as shown below.

Over $1.87 Billion Worth of Longs Liquidated

Trump’s announcement of imposing a 25% tariff on imports from Canada and Mexico and a 10% tariff on Chinese goods is set to take effect immediately.

The news triggered a panic sell-off, with over $2.21 billion in crypto liquidations reported in just 24 hours—about $1.87 billion of those were long positions, according to data resource Coinglass. Ethereum suffered the most.

This indicates that many traders were betting on the crypto market’s continued rise.

However, Trump’s tariffs swiftly changed market sentiment, rapidly deleveraging these positions. This “long squeeze” scenario is not uncommon in crypto markets.

The tariffs were perceived as an economic policy and the beginning of a potential trade war. Canada, Mexico, and China announced retaliatory measures, adding to the global economic uncertainty.

The crypto market, often viewed as a hedge against traditional financial systems during stable times, can ironically become more volatile when global trade tensions escalate. For instance, it crashed massively during the COVID-19-era pandemic.

The introduction of Trump tariffs further raised concerns about inflation.

Higher tariffs often increase businesses’ costs, which they pass on to consumers, fueling inflation. As a result, Trump’s move could lead to tighter monetary policy from the Federal Reserve, potentially pushing interest rates up to combat rising prices.

Higher interest rates are generally detrimental to speculative assets like cryptocurrencies, as they make safer investments, like bonds, more attractive. Bitcoin and the broader crypto market are also declining amid such sentiments.

Bitcoin Teeters on Critical Support as Market Awaits Next Move

Bitcoin is testing a crucial support level of around $93,878 after a sharp 3.89% decline in the last 24 hours.

The flagship cryptocurrency is trading near the lower boundary of its multi-week consolidation range, which has defined BTC’s price action since December 2024.

A rebound from this level could set the stage for a recovery toward the upper trendline of the range, which sits above $106,000. Such a move would align with Bitcoin’s historical tendency to bounce off key support levels during periods of consolidation.

Additionally, the 50-day exponential moving average (EMA), currently at $98,589, could serve as an intermediate resistance level on the way up.

However, failure to hold this support could spell trouble for BTC bulls. A decisive breakdown below the current range may trigger a deeper correction, potentially dragging prices toward the 200-day EMA, which is around $83,026.

The relative strength index (RSI), at 36.74, suggests that BTC is nearing oversold conditions. However, if market sentiment weakens, further downside pressure remains possible.

Ethereum Bounces Off Key Support

ETH is currently testing its .236 Fibonacci retracement level ($2,609) as the next upside target after showing signs of bullish reversal from its deeper support near $2,150, a historically significant area where buyers previously stepped in.

If Ethereum closes above $2,609, its immediate upside target would be around its 0.382 Fib line at $2,692. However, the sell-off could continue if ETH fails to hold above $2,150, eyeing a deeper correction toward $2,000 or even $1,750.